The 'Personal Information' card on a person allows a contact to be marked as deceased (a date of death is optional).
To prevent insensitive automatic communication:
the record is tagged as deceased
opt out flags are set for email and automatic sheep emails
consent records withdrawn.
Note: The contact will not be removed from any data exports so any manual exports should apply appropriate filters.
Where appropriate the record should be anonymised and then archived in line with your organisations data policy.